Time for chief compliance officers to get tough and get smart, or else
Double-checking, delegating (giving virtual head slaps) and becoming a student of the Investment Advisers Act of 1940 are part of the deal
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November 18, 2022 at 2:56 AM
Aurora Compliance Solutions
RIA Set-up Firm
Top Executive: Edward Romanowsky
Bill Winterberg
Les,
In your opinion, should owner-advisors also occupy the role as CCO, or should the responsibility be addressed by a separate individual or outsourced relationship?
Les Abromovitz
Bill has raised a great question, which I kicked around with a few people. The primary argument for an owner being CCO is that the individual has the most to lose if a compliance problem occurs. This approach also avoids a situation where a CCO does not have the clout to enforce compliance policies and procedures. As the firm grows and compliance issues become more complicated, however, it may be impossible for an owner to handle the CCO duties. At that point, it makes more sense for a senior person to become CCO or to outsource some of those responsibilities.
At many small RIAs, the owner wears many hats, which includes serving as the firm’s CCO. Although examiners are usually sympathetic to the economic constraints imposed on small RIAs, they still expect the firm’s CCO to fully understand the Investment Advisers Act and its rules. Examiners won’t lower the bar, because an owner/CCO has too many things on his or her plate.
